TY - JOUR
AU - Alesina,Alberto
AU - Angeletos,George-Marios
TI - Fairness and Redistribution: U.S. versus Europe
JF - National Bureau of Economic Research Working Paper Series
VL - No. 9502
PY - 2003
Y2 - February 2003
DO - 10.3386/w9502
UR - http://www.nber.org/papers/w9502
L1 - http://www.nber.org/papers/w9502.pdf
N1 - Author contact info:
Alberto F. Alesina
Department of Economics
Harvard University
Littauer Center 210
Cambridge, MA 02138
Tel: 617/495-8388
Fax: 617/495-7730
E-Mail: aalesina@harvard.edu
George-Marios Angeletos
Department of Economics, E52-530
MIT
77 Massachusetts Avenue
Cambridge, MA 02139
Tel: 617/452-3859
Fax: 617/253-1330
E-Mail: angelet@mit.edu
AB - Different beliefs about how fair social competition is and what determines income inequality, influence the redistributive policy chosen democratically in a society. But the composition of income in the first place depends on equilibrium tax policies. If a society believes that individual effort determines income, and that all have a right to enjoy the fruits of their effort, it will chose low redistribution and low taxes. In equilibrium effort will be high, the role of luck limited, market outcomes will be quite fair, and social beliefs will be self-fulfilled. If instead a society believes that luck, birth, connections and/or corruption determine wealth, it will tax a lot, thus distorting allocations and making these beliefs self-sustained as well. We show how this interaction between social beliefs and welfare policies may lead to multiple equilibria or multiple steady states. We argue that this model can contribute to explain US vis a vis continental European perceptions about income inequality and choices of redistributive policies.
ER -